The DJM Perspective

I’m sticking with the Sanity Defense: The reports of my death have been greatly exaggerated!! Not my quote, however, the retail apocalypse is turning out to be short-lived and short sighted. After a few years of headlines blaring about devastation and the scourge of e-commerce for physical stores, retailers in recent quarters are posting healthy comps and increases in foot traffic. "The term 'retail apocalypse' has been misused for years," said Michael Brown, partner in the retail practice of global strategy and management consultancy A.T. Kearney and author of the report “The Future of Shopping Centers. "Throughout the whole shifting dynamic in retail, the one thing that has never changed is the need to have compelling goods and services offered with convenience and a price people are willing to pay.

“Non si serra mai una porta che non se n’apra un’altra”: Over the past 25 years, my dear friends Eva and Dieter Mees often quoted this classic Italian proverb to me- “As one Door Closes another Opens”. We would meet once a week for a “cena autentico” of time honored Corbelli family recipes. I reference this in the context of timeless traditions of professional life with the recent transition we’ve just completed with Eric Sahn, DJM’s CFO for the past 15 years. Eric has decided to step down from an active role with the company, while continuing his ongoing obligations to the multiple DJM-sponsored partnerships. Eric was instrumental in ushering in an era of tremendous growth for DJM from his first day on the job in 2003 to his last.

Goin Fishin: Guggenheim’s Investments’ Recession Dashboard (I didn’t make this up) is lit up like a Christmas tree, lots of red and orange, colors that, according to many, signal market stress, and stir up investors’ survival instincts, while others see nothing but a pot of gold at the end of this never-ending rainbow. The nearly decade long run of economic growth is beginning to feel like a fairy tale, unfortunately without a happy ending for many who are not paying attention. Depending on perspective, we all know how this ends; an empty punchbowl and massive hangover. There appears to be a rising chorus of those in the know who say, that “business cycles do not die of old age”: nearly 10 years of growth in the US is pretty unprecedented.

Eyes Bigger than Your Stomach!: As my mother used to say, over and over, this sentiment pretty much sums up Americans’ insatiable appetite for consuming. More is Better! Quantity v. Quality! Right?! Based on a recent 2017 International Council of Shopping Centers summary of retail consumption, total retail sales (excluding restaurants, gasoline and automobiles) is estimated at $3.4 trillion nationwide, with 11%, or $400 billion represented by on-line sales, 31% from Amazon alone. Contrary to popular belief, E-commerce isn’t the lean and mean culprit behind declining bricks & mortar sales, but our own beloved commercial real estate industry.

Behavioral Economic & The Power of Irrational Behavior: I thought we were all generally self-centered beings, driven by some dialed up sense of logic and morality: Evidently, Richard Thaler, the 2017 Nobel prize winner in economics, and acclaimed author of “Nudge”, a book about helping people make better decisions, believes differently… “people are predictably irrational”. I suppose that when it comes to investment decisions, retirement plans, reverse mortgages, life insurance, annuities, private jets, college tuition, charitable contributions, etc., don’t necessarily fit the model of rational behavior.

Just Hummin the Summertime Blues: …. blue sky, warm evenings, long days and cool nights….lots of family time….lounging like lizards…time to reflect on the past 25 years working on DJM…Nonetheless, busy times as we launched our $500 million net lease Fund II, the recapitalization of Lido Marina Village, the completion of two creative and complex proposals for a large marina/retail repositioning in Southern California, and an iconic retail “reimagining” project in downtown San Francisco, along with our recent success in winning the creative and competitive contest to rebrand and re-tenant The Runway in Playa Vista

“The Reports of my Death have been Greatly Exaggerated”: “Get your facts first, then you can distort them as you please”. Just a few quotes from one of my favorite American storytellers, Samuel Clemens, aka Mark Twain. Coincidentally, these pithy tidbits of perspective relate to DJM Capital Partners’ everyday commitment to identifying investment opportunities, digging deep on the numbers and avoiding the cardinal sin of seduction, falling in love with the real estate. Oh, and the notion that we’re all dead men walking developers and investors because of Amazon and Google’s new “drone delivery”, the impact of ecommerce, and the tech mantra that the internet is eating our “bricks & mortar” lunch, or will soon enough. If one is convinced by tech’s forecast of the future of retail; we should bunker down, sell the portfolio and devolve into some couch potato bot, headset firmly in place linking us to the newest Virtual Reality offering via AI.